University of Tennessee

U.S. Corporate Governance Gets a B- in 2020

January 12, 2021

Effective governance is never more important than during a crisis, and COVID-19 has challenged corporate America like never before. Despite – or, perhaps, because of – a pandemic that fundamentally changed how most companies operate, the Institute of Internal Auditors-University of Tennessee’s second annual American Corporate Governance Index shows some improvements in governance practices among publicly held companies in the United States.

This year’s ACGI finds companies scoring an average B- (82) on a scale of 1-100. That’s a slight gain from a C+ (79) a year ago. But the score still falls short of what the IIA and UT’s Neel Corporate Governance Center consider ideal practices for ensuring corporate sustainability, a healthy culture, transparent and accurate disclosures, and effective policies and structures.

Results of the ACGI do show gains across the Index’s eight Guiding Principles of Corporate Governance. Compared with last year’s results, company size (revenue) and industry took on bigger roles in explaining variations in ACGI scores. The results suggest that, during periods of heightened risk such as COVID-19, companies in regulated industries (financial services, transportation and utilities) have stronger governance.

The most notable improvement, according to the Index, is a decrease in the number of companies receiving a failing governance grade. In 2019, 10 percent of companies scored an F, compared with only 2 percent in 2020. Similar to the first year of the ACGI, the majority of companies scored in the B and C range of governance performance, with less than one-fifth earning an A-range performance.

“While no one wants to see a repeat of 2020, the pandemic-fueled focus on crisis management likely contributed to the modest gains we see in this year’s ACGI,” said IIA president and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “However, the Index tells us that boards still don’t challenge management as much as they should. This year’s ACGI shows that more than one-third of board members would be hesitant to offer a contrary opinion or to push back against the CEO. What’s more, boards do not do an adequate job of verifying – or even asking – whether information they receive is accurate or complete, scoring only a D+. This is an essential, baseline element of effective governance.”

Among other key findings of the IIA-UT American Corporate Governance Index:

  • Bureaucracy hampers governance. Management structures are not always effective at getting the right information to the right decision makers in a timely manner (Score: C+, or 79). 

  • Governance demands transparency, but it’s not always there. Companies could be more purposeful and transparent in choosing and describing their key policies and procedures related to corporate governance to allow key stakeholders an opportunity to evaluate whether those policies and procedures are optimal and reliable (Score: C, or 75).

  • Long-term outlooks and governance evaluations continue to lag. Companies continue to be deficient in their long-term outlook (Score: C-, or 70). They don’t formally evaluate the full system of corporate governance on a regular basis, leaving the door open to critical gaps (Score: C-, or 71). At the same time, employees receive inadequate training to complete expected job duties (Score: C, or 76). 

“The ACGI goes beyond the publicly observable aspects of corporate governance to provide an internal perspective on the effectiveness of corporate governance throughout the organization,” said Terry L. Neal, Ph.D., CPA, Director of Corporate Governance at UT’s Neel Corporate Governance Center. “In a crisis, such as the COVID-19 pandemic, a lack of timely or reliable information and less-than-ideal governance measures can affect not just the profitability of the company, but its employees, customers, vendors and others and, indeed, long-term sustainability.”

The ACGI is designed to be a reliable barometer of American corporate governance and to provide insight into how companies perform in key areas based on Guiding Principles of Corporate Governance, developed in partnership between the Neel Corporate Governance Center and the IIA. These principles are based on a compendium of relevant guidance and principles advanced by experts in the field, including the National Association of Corporate Directors (NACD), the New York Stock Exchange, the Committee of Sponsoring Organizations of the Treadway Commission (COSO), the Business Roundtable, the Investor Stewardship Group, UT’s Neel Corporate Governance Center, the IIA and others.

For a full copy of the American Corporate Governance Index, please visit



John Babinchak, 407-937-1240/407-325-5560,

Suzanne Dawson, S&C Public Relations Inc., 646-941-9140,


About the Institute of Internal Auditors

The Institute of Internal Auditors (IIA) is the internal audit profession’s most widely recognized advocate, educator and provider of standards, guidance and certifications. Established in 1941, the IIA today serves more than 200,000 members in nearly 200 countries and territories. The IIA’s global headquarters are in Lake Mary, Fla. For more information, visit or


About the University of Tennessee, Knoxville’s Neel Corporate Governance Center

The Neel Corporate Governance Center at the University of Tennessee, Knoxville’s Haslam College of Business was founded in 2003 following the wake of corporate scandals that preceded the Sarbanes-Oxley Act of 2002. Its mission is to conduct and disseminate nationally recognized research on corporate governance with a focus on public policy.